claim no: fl-2020-000018 in the high court of justice ... · (2) argenta syndicate management...

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Claim No: FL-2020-000018 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS COMMERCIAL COURT (QBD) FINANCIAL LIST FINANCIAL MARKETS TEST CASE SCHEME Between:

THE FINANCIAL CONDUCT AUTHORITY

Claimant

– and –

(1) ARCH INSURANCE (UK) LIMITED

(2) ARGENTA SYNDICATE MANAGEMENT LIMITED

(3) ECCLESIASTICAL INSURANCE OFFICE PLC

(4) HISCOX INSURANCE COMPANY LIMITED

(5) MS AMLIN UNDERWRITING LIMITED

(6) QBE UK LIMITED

(7) ROYAL & SUN ALLIANCE INSURANCE PLC

(8) ZURICH INSURANCE PLC

Defendants

______________________________________________________

DEFENCE OF THE THIRD AND FIFTH DEFENDANTS

______________________________________________________

A. Summary

1. This Defence is the statement of case of the Third and Fifth Defendants.

2. The Third and Fifth Defendants do not plead to allegations in the Particulars of Claim

advanced against other Defendants and/or which are not relevant to the case against

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the Third and Fifth Defendants. The Third and Fifth Defendants reserve the right to

adopt any argument or the benefit of any argument advanced by any other Defendant.

3. Save where otherwise indicated:

3.1 Without admission and for convenience only, the Third and Fifth Defendants

adopt the headings and defined terms in the Particulars of Claim.

3.2 References to paragraph numbers and Schedules are references to paragraphs

and Schedules of the Particulars of Claim.

4. As to paragraph 4, the Third and Fifth Defendants deny the FCA’s case save to the extent

admitted or not admitted herein. The Third and Fifth Defendants’ case is set out in

detail below and is summarised as follows:

4.1 As to the issue of coverage:

(a) In relation to clauses providing cover for the action of competent authorities

(MSA 1 Clause 1, MSA 3 Clause 1, EIO 1.1 Clause 3, EIO 1.2 Clause 1), the

FCA cannot prove any relevant insured peril, namely

(i) that there was the defined action (for example, action by competent

authorities following a danger in the vicinity of the premises (see

MSA1 Clause 1)) having the specified effect (for example, preventing

access to the premises (see MSA 1 Clause 1)); and

(ii) in the case of the relevant Policies underwritten by the Third

Defendant, that the Infectious Disease Carve-Out1 does not apply.

(b) The FCA cannot prove the insured peril under the narrowly circumscribed

MSA2 Clause 8.

1 Defined at paragraphs 32 and 43 below.

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(i) That clause requires proof (amongst other things) that the loss

suffered by the insured resulted solely and directly from the complete

cessation of the Insured’s business caused by an incident within a one

mile radius of the Insured’s premises.

(ii) Neither the pandemic nor the presence of a person having COVID-19

within one mile of the premises amounts to an incident. The FCA has

not alleged the occurrence of any incident, let alone within a one mile

radius.

(iii) Further or alternatively, any such incident must have resulted in a

government / public authority order, or civil / statutory authority

imposition (as the case may be) having the effect of denying or

hindering physical access to the premises. The FCA cannot prove any

such order / imposition having any such effect resulting from any such

incident.

(c) Two of the relevant Wordings of the Fifth Defendant (see MSA 1 Clause 6

and MSA2 Clause 6) provide localised disease cover for interruption of or

interference with the business in consequence of and/or following illness

resulting from notifiable disease (including, from 5 March 2020 onwards,

Covid-19) sustained by any person within a twenty five mile radius of the

premises.

(i) For coverage, these clauses require there to have been one or more

cases of Covid-19 within a radius of 25 miles from the premises which

were the specific cause of any claimed interruption of or interference

with the business.

(ii) Neither the pandemic nor the countrywide reaction to the pandemic

by the government which happens therefore to cover the area within

a radius of 25 miles from the premises without reference to or reliance

upon the specific case or cases within the relevant area is sufficient.

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(iii) These clauses do not cover any interruption of or interference with

the business prior to 5 March 2020 or any date thereafter falling

before the first date when the Insured proves that at least one person

within the 25 mile radius sustained Covid-19.

(iv) Further, as a result of this clause only providing local disease cover, an

insured can recover only for those losses which have been caused by

the proved incidence of Covid-19 within the 25 mile radius and not

those losses caused by Covid-19 elsewhere in the UK.

4.2 Even if the insured peril is proved under any of the relevant Wordings, the FCA

must still prove that such insured peril factually and proximately caused the loss

claimed.

(a) On a true construction of the relevant Wordings, the Third and Fifth

Defendants are only liable for loss proximately caused by the insured peril

under the relevant Policy. None of the relevant Policies underwritten by the

Third and Fifth Defendants insures against the peril purportedly identified

in paragraph 53.1 as the “only one proximate… cause of the assumed

losses”. The Third and Fifth Defendants’ case as to the proximate cause(s)

of the loss(es) is set out in section N. below.

(b) Each insured peril in the relevant Wordings would be a factual cause and, if

so, a proximate cause only to the extent of the business interruption loss (if

any) which would not have occurred but for such insured peril. The “but for”

test is applicable both as a matter of the application of ordinary principles

of causation and by virtue of agreement between the parties in the

applicable trends clauses.

B. Introduction

5. As to paragraph 5:

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5.1 It is admitted that the FCA is the regulator of the Defendants and other insurers

in the UK.

5.2 By the Framework Agreement, the Third and Fifth Defendants have agreed with

the FCA that declaratory relief may be sought by the FCA in relation to the

disputed issues (as defined in Recital E of the Framework Agreement) for the

purpose and to the extent set out in clause 1.1 of the Framework Agreement.

5.3 Insofar as the FCA seeks declaratory relief on broader issues, including on issues

of fact, the Third and Fifth Defendants have denied at the first CMC, and continue

to deny, that the FCA is entitled to do so or that the present proceedings are the

fair, appropriate or proper forum in which to do so.

5.4 The last sentence is noted.

6. Paragraphs 6 and 7 are admitted. The Third and Fifth Defendants will refer to and rely

upon the Framework Agreement as necessary.

The Parties

7. Paragraphs 8 and 9 are admitted.

8. As to paragraph 10, the relevance of Annexe 1 to the Particulars of Claim is not

understood and is accordingly denied. Without prejudice to the foregoing:

8.1 Paragraphs 1 to 10 of Annexe 1 to the Particulars of Claim are admitted.

8.2 The Third and Fifth Defendants do not otherwise plead to Annexe 1 to the

Particulars of Claim, and the FCA is required to prove the facts asserted and their

alleged relevance to the issues in dispute.

8.3 In the premises, paragraph 10 is otherwise not admitted.

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8.4 For the avoidance of doubt, it is outside the statutory powers and functions of the

FCA to override, alter, amend or expand the contract entered into between the

Third and Fifth Defendants and their insureds or any of them. Consequently, the

issues in this case are to be argued with reference to the terms and wordings of

the relevant Policies and not otherwise.

C. The policy wordings and applicable law


9.1 It is admitted that the Third and Fifth Defendants wrote insurance policies on the

wordings listed in Schedules 3 and 5 respectively, which provide coverage in

accordance with the terms of those wordings (and not otherwise) and which have

policy periods covering the period late 2019 and early 2020.

9.2 Save as aforesaid, no admissions are made as to paragraph 11.

10. Paragraph 12 is noted but contains no allegation to which it is necessary to plead.

11. Paragraphs 13 and 14 are noted.

12. Paragraph 15 is admitted.


13.1 The first sentence is admitted.

13.2 As to the second sentence:

(a) The first phrase is noted.

(b) The second phrase is noted as a statement of the understanding and

intention of the FCA. The Third and Fifth Defendants are unable to make

any admissions or denials, and reserve all their rights, in that regard.

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D. COVID-19 and the public authority response to it


14.1 The first and second sentences are admitted. The same virus is also variously

known as the “Wuhan novel coronavirus (2019-nCoV)” – see, for example,

regulation 2(1) of the Health Protection (Coronavirus) Regulations 2020, SI

2020/129.

14.2 Paragraph 17 is otherwise denied or not admitted, as more fully set out herein

below.

15. Save as set out in the sub-paragraphs below, paragraph 18 is admitted as a broadly

accurate summary of some of the core events relating to Covid-19 and the response to

it in UK. The Third and Fifth Defendants will refer to and rely upon the chronology that

is being agreed between the parties as part of the agreed facts, and the documents

underlying the matters set out at paragraph 18 (including the relevant legislation), for

their full terms and true effect. Further:

15.1 The Third and Fifth Defendants should not be taken to accept that the events set

out in paragraph 18 constitute a “public authority response” within the meaning

of any particular policy wording. The correct legal characterisation of the various

authorities’ actions and/or responses and their relevance to, for the purposes of,

or with reference to, particular policy wordings are a matter for submissions. The

Third and Fifth Defendants’ cases with reference to their respective relevant

wordings are as pleaded herein below.

15.2 Save that Covid-19 was made notifiable in Wales on 6 March 2020 (and not 5

March 2020 as alleged), paragraph 18.7 is admitted.

15.3 As to paragraph 18.11:

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(a) It is admitted that the Chancellor of the Exchequer made a statement in the

House of Commons as quoted in part from Hansard in paragraph 18.11.

(b) If it is being alleged by the FCA, it is denied that there were any meetings on

or before 17 March 2020 between the Economic Secretary to the Treasury

(or any other member of the government) and anyone representing either

the Third or the Fifth Defendants.

(c) It is noted, as set out in footnote 2, that the FCA does not seek to prove that

any particular matter was agreed between “insurers” and the Government.

The Third and Fifth Defendants are proceeding accordingly. It is further

denied, in so far as the FCA might seek to allege, that any general matter

was agreed between either the Third or Fifth Defendants and the

Government. If the FCA might seek so to allege, it is incumbent on the FCA

to make the allegation forthwith without equivocation so that the Third and

Fifth Defendants can have the opportunity to deal with and dispatch it.

(d) As to the allegation in footnote 2 as to the purpose for which the FCA seeks

to rely on paragraphs 18.21 to 18.23 (assuming that those references are

intended to be to paragraphs 18.11 and 18.13):

(i) It is denied (if it is alleged) that the Government informed the Third or

Fifth Defendants of the matters alleged or of any matters.

(ii) It is denied that it was incumbent on the Third or Fifth Defendants to

inform the Government as alleged or at all.

(iii) The Third and Fifth Defendants are unable to admit or deny whether

the Government wished to have, or would have availed itself of, an

opportunity to take further steps as alleged.

(iv) It was a matter for the Government to take such action or make such

statements as it thought fit in the discharge of its functions and

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powers. Nothing done or not done by the Government can amend

the Wordings or alter their legal meaning as between the Third and

Fifth Defendants on the one hand and their respective Insureds on the

other hand. The relevance of Government actions and statements

within the Wordings is a matter of private contract between the Third

and Fifth Defendants and their respective Insureds. They are

otherwise irrelevant.


(a) The Third and Fifth Defendants are unable to admit or deny whether Mr

Sunak made the alleged statement. The Third and Fifth Defendants were

not present at any meeting of the Treasury Committee on 18 March 2020

(or on any other date).

(b) If Mr Sunak did make the alleged statement, it is denied that any agreement

was concluded on 17 March 2020 (or any other date) between the

Government and the Third or Fifth Defendants, whether as alleged or at all;

or that the Third or Fifth Defendants or anyone or any entity representing

them then (or at any other material time) said anything to, or received any

written or oral communication from, whomever “we” in Mr Sunak’s alleged

statement was.

(c) It is denied, if it is being alleged, that any relevant insuring agreement to

which the Third or Fifth Defendants are party was amended or varied so as

to provide that the Third or Fifth Defendants would “do the right thing”

(whatever that may mean). The Third and Fifth Defendants’ policies of

insurance are binding contracts on the terms of the applicable Wordings

(and related applicable policy terms and conditions) and not otherwise.


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(a) It is admitted that the extract quoted by the FCA appears in the COVID-19

Fact Sheet published by the UK Government on 18 March 2020. No

admissions are made as to the accuracy of the Government’s Fact Sheets.

(b) The substance of the first bullet point, if intended to be relied upon by the

FCA for any purpose, is denied. The UK Government had no standing or

authority to make binding statements or express binding opinions as to the

meaning and effect of private law contracts of insurance between the Third

or Fifth Defendants and their respective Insureds; and its opinions as to the

effect of its advice on coverage under those contracts are irrelevant.


16.1 It is admitted that the 21 and 26 March Regulations prohibited different conduct

in relation to different categories of business at different times.

16.2 It is however denied that these Regulations did so “in combination with

Government guidance and announcements” as alleged. The UK Government’s

guidance and announcements were not as a matter of law capable of prohibiting

and did not prohibit any conduct.

16.3 Save as set out below, sub-paragraphs 19.1 to 19.7 are admitted:

(a) The Third and Fifth Defendants adopt the Seventh Defendant’s Defence in

relation to paragraph 19.3 and repeat the same in relation to paragraph 19.5

mutatis mutandis.

(b) As to paragraph 19.7, it is not admitted that by virtue of the announcement

on 18 March 2020 referred to at paragraph 18.14, the UK Government was

exercising any legal power, or indicating the future exercise of any legal

power, to require schools to close. Insofar as relevant, the FCA is put to

proof of the legal basis, if any, on which (i) the announcement as to school

closures was made, and (ii) it is alleged that schools (of all relevant different

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types) in fact closed. In the meantime, it is denied that the announcement

operated so as legally to prevent or hinder schools from remaining open.

The Third and Fifth Defendants will rely upon the Coronavirus Act 2020 and

the 26 March Regulations for their full terms and true effect.

E. The Defendants’ refusal of cover


17.1 As to the first sentence, it is admitted that the Third and Fifth Defendants have

received and declined some claims under some policies written under their

respective Wordings, but it is denied that the Third and Fifth Defendants have

received and/or declined claims under all of the policy forms comprised within

the Wordings.

17.2 It is admitted that the FCA disputes the refusal of certain claims as set out in the

Particulars of Claim. Otherwise no admissions are made as to paragraph 20.

F. Prevalence of COVID-19 in the UK

18. Paragraph 21 is noted. It is denied that the FCA has a ‘right’ to rely on any expert

evidence as asserted in paragraph 21. Pursuant to the order made by Mr Justice Butcher

at the CMC on 16 June 2020, the FCA is not entitled to rely on any expert evidence at

the trial listed to commence on 20 July 2020 in relation to the issue of the prevalence

of Covid-19 in the UK.


19.1 The first sentence is admitted.

19.2 It is admitted that the relevant area may be stated as a radius of a certain number

of miles from the insured premises.

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19.3 It is denied that the meaning of the term ‘vicinity’ is to be determined in the

manner alleged. Vicinity is a word which must be given its natural meaning in its

contractual context.

19.4 The final sentence is only admitted in relation to the wordings of the Fifth

Defendant which specify a number of miles from the insured premises. It is

otherwise denied.

20. The Third and Fifth Defendants adopt the pleaded cases of the Fourth and Seventh

Defendants in response to paragraphs 23 to 28. To the extent there are minor

inconsistencies, they are not relevant for present purposes.

G. Assumed facts

21. As to paragraph 29, it is admitted that the FCA has proposed Assumed Fact Patterns at

Annexe 2 to the Particulars of Claim. Paragraph 29 is otherwise noted but contains no

allegations to which it is necessary to plead.

22. Paragraph 30 is noted but contains no allegations to which it is necessary to plead.

H. Policy intention


23.1 The first sentence is admitted and averred.

23.2 The second sentence is admitted.

23.3 The subjective intentions and views of the FCA and of the UK Government are not

relevant or admissible. Statements made by the Chancellor of the Exchequer, the

Economic Secretary to the Treasury and any and every other member of the

government are equally irrelevant and inadmissible for the reason set out in the

first sentence of paragraph 31.

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24. Paragraph 32 is denied. The facts and matters stated do not alter the applicable

principle, namely that each Wording is to be construed objectively within the admissible

and relevant factual matrix and nothing else.


25.1 The relevance of the facts and matters stated in the first sentence is denied. The

use of epidemic and pandemic exclusions by some insurers in some contexts, if

and insofar as it occurs, is irrelevant. The issue between the Parties is as to the

scope of cover created by the Wordings. It is irrelevant that Insurers did not

include an epidemic or pandemic exclusion clause if, on the objective construction

of the Wordings, the cover under the relevant Policies did not extend to such

perils in the first place.

25.2 The relevance of the second sentence is denied. If Zurich2 and/or Hiscox1-2

and/or Hiscox 4 contain the alleged or any exclusions from cover, that fact does

not form part of the factual matrix for any Policy underwritten by the Third or

Fifth Defendants. It is simply irrelevant.

25.3 Pending clarification as to (i) who on behalf of each of the Third and Fifth

Defendants is said to have made the alleged election, when or in what context,

and (ii) the relevance of the alleged election to the objective construction of the

Third and Fifth Defendants’ Wordings as written, the final sentence is denied. It

begs the issue as to the objective construction of the Third and Fifth Defendants’

Wordings as in fact written.

25.4 Save as aforesaid, paragraph 33 is denied.


26.1 The first sentence is denied for the reason given in the second sentence, which is

admitted and averred.

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26.2 The admissible objective intention of the Third and Fifth Defendants not to cover

pandemics (whatever that may mean) is to be found in the true construction of

the Wordings themselves, not with reference to other terms used by other

insurers in the context of other wordings which the FCA alleges might have been

used but were not.

27. As to paragraph 35, it is not necessary and it is not appropriate. It is accordingly denied

that the FCA may rely upon the so-called contra proferentem “rule”.

I. to M.

28. Insofar as sections I. to M. of the Particulars of Claim form part of the FCA’s case against

the Third and Fifth Defendants, those sections are pleaded to sample wording by sample

wording in the paragraphs which follow. It is appropriate to plead in this way, because

the relevant clauses and the language used within the relevant clauses are to be read

as a whole and in the immediate context and the relevant broader contexts.

Responding to the Particulars of Claim paragraph by paragraph would preclude the

proper approach to the sample wordings, because the FCA have pleaded to words or

phrases in isolation from their context. Save to the extent admitted or not admitted in

the paragraphs below and insofar as they relate to the FCA’s case against the Third

and/or Fifth Defendants, paragraphs 36 to 52 are denied.

1) The Third Defendant’s sample wordings

Ecclesiastical Type 1.1 wording

29. The Ecclesiastical Type 1.1 wording (“EIO1.1”) is found in policies insuring businesses or

charities (religious or otherwise) some of which were at some stage, and some of which

were never, required to close pursuant to government legislation or regulations.

30. The Third Defendant’s case is set out with reference to the lead wording as identified in

Schedule 3, namely ME857 – Parish Plus, which is a loss of income cover protecting

churches.

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EIO1.1 Prevention of access – Non-damage extension clause

31. Section 3 – Loss of income, extension clause 3 – Prevention of access – Non-damage

(“EIO 1.1 Clause 3”) defined the insurance being provided with reference both to what

was covered and to what was not covered.

31.1 With reference to what was covered, EIO 1.1 Clause 3 extended the insurance by

section 3 to cover loss resulting from interruption of or interference with the

Insured’s usual activities as a result of [1] access to or use of the premises being

prevented or hindered by [2] any action of government police or a local authority

(or, in some other wordings, Government Police or Local Authority) [3] due to an

emergency which could endanger human life or neighbouring property.

31.2 EIO 1.1 Clause 3 further stated, under the heading “what is not covered”, that the

coverage did not extend to closure or restriction in the use of the premises due

to the order or advice of the competent local authority as a result of an occurrence

of an infectious disease (or the discovery of an organism resulting in or likely to

result in the occurrence of an infectious disease).

32. Some other versions of EIO 1.1 defined the insurance being provided in terms of

business interruption and by way of a coverage provision and an exclusion

corresponding materially to what was covered and what was not covered respectively

in ME857. The “what is not covered” provision and the equivalent exclusion wordings

are referred to hereafter as the “Infectious Disease Carve-Out”, without distinction.

33. On a true construction of EIO 1.1 Clause 3 in the context of the EIO 1.1 wording ME857

as a whole:

33.1 The insured peril was interruption of or interference with the Insured’s usual

activities as a result of government action due to an emergency which could

endanger human life which action prevented or hindered access to or use of the

premises.

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33.2 Neither access to nor use of the premises is prevented unless it is rendered

physically (in the case of access and use) or legally (in the case of use) impossible.

33.3 Use of and/or access to the premises is hindered where it is made more difficult

or is inhibited, and whether the difficulty or inhibition applies to the Insured

and/or to its employees (or office-holders) and/or to its parishioners, congregants

or members (in the case of a church) or customers, clients or consumers (in the

case of a charity, school, care home or heritage business).

34. Her Majesty’s Government is the [G/g]overnment within the meaning of EIO 1.1 Clause

3. On its true construction and in the context of the wording in EIO1.1, in particular

Clause 6, the competent local authority in Clause 3 includes Her Majesty’s Government

within the meaning of the Infectious Disease Carve-Out. Without prejudice to the

generality of the foregoing:

34.1 The phrase “the competent local authority” in the Infectious Disease Carve-Out

means any authority which is legally competent to make an order or issue advice

affecting the locality of the insured premises. It extends to government, police,

magistrates or a local authority (if so legally competent) and would have been so

understood by a reasonable person.

34.2 The addition of the word “competent” before “local authority” in the Infectious

Disease Carve-Out, where that word does not appear in the coverage provision,

indicates that the phrase “local authority” is not being used in the identical sense

in both contexts.

34.3 The true meaning is informed and reinforced by:

(a) The factual matrix which was that (i) the Public Health (Control of Disease)

Act 1984 as amended gave powers to the Secretary of State, including under

sections 13 and 45C, to be exercised for the purpose of preventing,

protecting against, controlling or providing a public health response to the

incidence or spread of infection or contamination; and under section 45I to

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Justices of the Peace to make orders in relation to premises if infected or

contaminated, including orders to close the premises; (ii) the Health

Protection (Local Authority Powers) Regulations 2010 gave powers to local

authorities including under Regulation 8; and (iii) the Civil Contingencies Act

2004 gave power to a Minister to order that a specified event or situation

was to be treated as an emergency and to make emergency regulations as

provided including under sections 20 to 22.

(b) The contractual context supplied by Clause 6 of the EIO 1.1 wording. Clause

6 provided separate and specific cover in respect of any occurrence of a

Specified Disease (as defined) being contracted by a person at the premises

or within a radius of 25 miles of the premises which caused restrictions in

the use of the premises “on the order or advice of the competent local

authority.”

34.4 The Infectious Disease Carve-Out and Clause 6 were complementary to each

other.

34.5 Clause 6 stated the coverage which the Third Defendant was prepared to provide

in relation to Specified Diseases, including infectious diseases.

34.6 The Infectious Disease Carve-Out made clear that the coverage under clause 3 did

not apply in relation to infectious diseases.

34.7 It was patently not the purpose of clause 3 to extend the coverage that the Third

Defendant was prepared to provide in relation to Specified Diseases or to any

other human infectious diseases. Such coverage was clearly the subject of clause

6 and only of clause 6.

34.8 The reference to “the competent local authority” in the Infectious Disease Carve-

Out has the same meaning as the identical reference in clause 6, namely as set

out in paragraph 34.1 above. It extends to government, police or a local authority

(if so legally competent), as the relevant case may be. The use of the same phrase

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is, as a matter of construction and obvious inferred intention, no coincidence in

that the use of the phrase in clause 3 was obviously intended to coincide with the

use of the same phrase in clause 6, and vice versa.

35. Each of the presence and/or the real risk of the presence of SARS-CoV-2 and/or of

COVID-19 amounted to an emergency which could endanger human life from 12 March

2020 onwards. It is denied that there was an emergency which could endanger human

life prior to that date.

36. Access to churches was never physically prevented or hindered by any action,

instructions, guidelines, announcement or legislation of the government.

37. Use of churches was hindered by government advice, instructions, guidelines,

announcements and legislation, which discouraged their use for public gatherings as

from 23 March 2020.

38. From any relevant date when the use of the premises was hindered (and/or, if it was

the case, the premises were closed) by any form of government advice, instructions,

guidelines, announcements or legislation, such hindrance amounted to a restriction in

use or (if paragraph 36 above is not correct) a closure due to the order or advice of the

competent local authority within the meaning of the Infectious Disease Carve-Out. By

reason of the Infectious Disease Carve-Out, therefore, it is specifically denied that

clause 3 provides any cover to Insureds in relation to Covid-19.

38.1 For the avoidance of doubt, the Third Defendant relies upon the Infectious

Disease Carve-Out in relation to all other forms of insureds under different

versions of the EIO 1.1 wording mutatis mutandis.

38.2 Further for the avoidance of doubt, the EIO 1.1 wording ME869 was used for

insureds undertaking the business of a residential care home or day care facility

or similar. Neither access to nor the use of such premises was ever prevented or

hindered but, if it was, the Infectious Disease Carve-Out applies.

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39. On a true construction of EIO 1.1 Clause 3,

39.1 there is no cover at any time by reason of the Infectious Disease Carve-Out;

alternatively

39.2 if the Infectious Disease Carve-Out does not apply, there is no cover for any loss

prior to 23 March 2020 (being the earliest date when use of the premises was

hindered by action of the government).

Ecclesiastical Type 1.2 wording

40. The Ecclesiastical Type 1.2 wording (“EIO1.2”) is found in policies insuring nurseries and

schools and colleges, none of which was required by the 21 March Regulations or the

26 March Regulations or the Coronavirus Act 2020 or any other form of government

action to close.

41. The Third Defendant’s case is set out with reference to the lead wording as identified in

Schedule 3, namely ME886 – Nurseries, which is a business interruption cover

protecting nursery schools.

EIO1.2 Prevention of access – Non-damage extension clause

42. Section 3 – Business Interruption, extension clause 1 – Prevention of access (“EIO 1.2

Clause 1”) insured against [1] loss as insured under section 3 [2] directly resulting from

interruption of or interference with the Insured’s business at the premises [3] in

consequence of [4] access to or use of the premises being prevented or hindered by [5]

any action of Government Policy or Local Authority [6] due to an emergency which could

endanger human life [7] excluding closure or restriction in the use of the premises [8]

due to the order or advice of the competent local authority [9] as a result of an

occurrence of an infectious disease.

43. Phrases [7] to [9] are referred to hereafter as the “Infectious Disease Carve-Out”.

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44. Paragraphs 33 to 39 above are repeated mutatis mutandis.

45. Save to the extent set out above,

45.1 Schedule 3 to the Particulars of Claim is denied as it applies to EIO 1.1 and EIO 1.2.

45.2 Those paragraphs of the Particulars of Claim referred to in Schedule 3 as it applies

to EIO 1.1 and EIO 1.2 and all paragraphs of the Particulars of Claim to which the

foregoing paragraphs refer or on which they rely are denied.

46. In the premises, it is denied that the FCA is entitled to the general or particular

declarations claimed against the Third Defendant.

2) The Fifth Defendant’s sample wordings

MS Amlin Type 1 wording

47. The MS Amlin Type 1 wording (“MSA1”) is found predominantly but not exclusively in

policies insuring businesses which were never required to close pursuant to any

government legislation or regulations.

MSA1 Additional Cover clause 1 – Action of competent authorities

48. Section 6 – Business Interruption, Additional Cover clause 1 – Action of competent

authorities (“MSA1 Clause 1”) insured against loss resulting from interruption or

interference with the business following action by the police or other competent local,

civil or military authority following a danger or disturbance in the vicinity of the

premises where access will be prevented.

49. On a true construction of MSA1 Clause 1:

49.1 The insured peril was [1] interruption of or interference with the business at the

premises [2] following action by one or more of the identified entities [3] itself

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following a danger or disturbance in the vicinity of the premises [4] which action

prevented access to the premises.

49.2 The phrase “where access will be prevented” refers to:

(a) the effect of the action by one or more of the identified entities following a

qualifying danger, being

(b) the prevention of access to the premises. In the light of paragraph 46.1 of

the Particulars of Claim, this is understood to be common ground.

49.3 Access to the premises is to be distinguished from use of the premises. Prevention

of access to the premises is to be distinguished from hindrance of access to the

premises.

49.4 Access to the premises will only be prevented where access is not physically

possible.

49.5 Access to the premises will not be prevented where (i) physical access is merely

made harder or is hindered; and/or (ii) use of the premises is restricted or not

legal.

50. Within the meaning of MSA1 Clause 1 “competent local, civil or military authority”

includes each of Her Majesty’s Government and Parliament if and when exercising

authority over the location of the premises.

51. A danger within the meaning of MSA1 Clause 1 requires an acute risk of harm from

something specific happening in the immediate locality of the premises. There was no

such danger anywhere in the UK prior to 12 March 2020. After 12 March 2020, it is a

question of fact to be determined in each case having regard to the location of the

insured premises whether and, if so, when there was first a danger in the vicinity of such

premises.

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52. It is noted (with reference to paragraph 46) that the FCA does not allege any prevention

of access at any time prior to 16 March 2020.

53. “Following” means proximately caused by, alternatively having a significant causal

connection with. In the premises:

53.1 Any action pre-dating the existence of a danger in the vicinity of any insured’s

premises was not “following” such danger.

53.2 In relation to any action post-dating the existence of a danger in the vicinity of any

insured’s premises, it is question of fact (on which the Insured bears the burden

of proof) whether such action (even if it had the required effect of preventing

access) was caused by such danger.

54. In so far as might be alleged, it is presently denied that anything done by any competent

authority, whether by way of “advice, instructions and/or announcements” or

legislation or otherwise followed a danger in the vicinity of any insured’s premises

within the meaning of MSA1 Clause 1. Further or alternatively, nothing done by any

competent authority, whether by way of “advice, instructions and/or announcements”

or legislation or otherwise before, on and/or after 16 March 2020 prevented physical

access to the premises of any Insured. Such action presented no physical impediment

to accessing the premises.

55. If, contrary to the Fifth Defendant’s primary case, access could be prevented by legal

impediment to the use of the premises for the business, the Fifth Defendant’s case is as

follows.

56. Nothing done by any competent authority by way of “advice, instructions and/or

announcements” before, on and/or after 16 March 2020 legally prevented access to any

premises.

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57. In the case of insured businesses falling within Part 1 or Part 2 of the Schedule to the

Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 (“the 21

March Regulations”):

57.1 No action taken by the government at any time prior to the coming into force of

the 21 March Regulations was action “where access will be prevented” within the

meaning of MSA1 Clause 1.

57.2 The passing and/or coming into force of the 21 March Regulations

(a) was not action “where access will be prevented” as regards insured

businesses falling within Part 1 of the Schedule, because access to the

premises continued to be permitted save to the limited extent of the

requirements set out in paragraph 2(1) of those Regulations;

(b) was action “where access will be prevented” as regards insured businesses

falling within Part 2 of the Schedule.

58. In the case of insured businesses falling within any part of Schedule 2 to the Health

Protection (Coronavirus, Restrictions) (England) Regulations 2020 (“the 26 March

Regulations”) but to which the 21 March Regulations did not already apply:

58.1 None of the action taken by the government at any time prior to the coming into

force of the 26 March Regulations was action “where access will be prevented”

within the meaning of MSA1 Clause 1.

58.2 The passing and/or coming in force of the 26 March Regulations

(a) was action where “access will be prevented” as regards insured businesses

newly falling within Part 2 of the Schedule;

(b) was not action “where access will be prevented” as regards:

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(i) insured businesses (if any) newly falling within Part 1 of the Schedule,

because access to the premises continued to be permitted save to the

limited extent of the requirements set out in paragraph 2(1) of those

Regulations;

(ii) insured businesses falling within Part 3 of the Schedule, because

access to the premises continued to be expressly permitted for the

purpose of carrying on the business;

(iii) insured businesses to which paragraph 5(1) of the Regulations

applied, because access to the premises continued to be expressly

permitted for the purpose of carrying on the business to the extent

permitted by the exception to paragraph 5(1)(a).

59. In the case of insured businesses which did not fall within any part of the Schedule to

any of the Regulations, none of the action taken by the government at any time was

action “where access will be prevented” within the meaning of MSA1 Clause 1.

60. Further, and without prejudice to any of the foregoing and specifically as regards the

period after the coming into force of the 26 March Regulations, the restrictions on

movement contained in paragraph 6 of the 26 March Regulations did not prevent access

to the premises of any business of a type not listed in Part 2 of Schedule 2, in that:

60.1 Paragraph 6(2)(f) expressly provided that a reasonable excuse for a person to

leave the place where they are living included the need to travel for the purposes

of work, where it was not reasonably possible for that person to work from the

place where they were living.

60.2 If working from home caused or would cause loss to the insured from not being

able to undertake the business to the full extent permitted by law, then it was not

reasonably possible for the work to be done from the place where the business

owner and/or his, her or its employees were living.

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60.3 In those circumstances, paragraph 6(2)(f) permitted the business owner and/or

his, her or its employees to travel and gain access to the premises for the purpose

of conducting the work which it was not reasonably possible to do from home.

Consequently, in any case where loss was or would be suffered from working at

home (i.e. in any case where the insured seeks to claim under the policy), access

to the premises was not prevented.

60.4 If necessary and relevant (which is denied), in the case of businesses whose

customers or clients would ordinarily attend the premises, they could still do so

to the full extent permitted by (i) the general language of “reasonable excuse”,

and/or (ii) the specific language of paragraph 6(2)(a) of the Regulations.

MSA1 Additional Cover clause 6 – Notifiable Disease

61. Section 6 – Business Interruption, Additional Cover clause 6 – Notifiable disease etc.

(“MSA1 Clause 6”) insured against [1] Consequential loss (as defined) [2] as a result of

interruption of or interference with the business [3] following (amongst other things),

by (a)(iii), any notifiable disease (as defined) within a radius of twenty five miles of the

premises but [4] subject to the condition that there was only cover for loss arising at

those premises directly affected by such notifiable disease.

62. Consequential loss was defined as

“Loss resulting from interruption or interference with the business carried on by you at

the premises in consequence of damage to property used by you at the premises for the

purpose of the business.”

63. Damage was defined as

“Loss or destruction of or damage to the property insured as stated in the schedule and

used by you in connection with the business.”

64. On a true construction of MSA1 Clause 6,

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64.1 The insured peril was interruption of or interference with the business at the

premises proximately caused by, alternatively having a significant causal

connection with, any notifiable disease (otherwise to be treated under MSA1

equivalently to damage) within a twenty five mile radius of the premises.

64.2 The Insured is not entitled to any indemnity in respect of loss arising at any

premises not directly affected by the notifiable disease within twenty five miles.

64.3 The Insured is not entitled to any indemnity in respect of loss arising at any

premises if such loss is attributable to any notifiable disease beyond twenty five

miles.

65. Notifiable disease was defined as

“illness sustained by any person resulting from:

…

b) any human infectious or contagious disease … an outbreak of which the competent

local authority has stipulated will be notified to them.”

66. By the Health Protection (Notification) (Amendment) Regulations 2020, SI 2020/237,

made by the Secretary of State for Health at 6.15pm on 5 March 2020, laid before

Parliament at 2.00pm on 6 March 2020 and coming into force immediately after they

were made, the Secretary of State for Health and/or Parliament amended Schedule 1

to the Health Protection (Notification) Regulations 2010 so as to insert within Schedule

1 (Notifiable Diseases) COVID-19. An equivalent Regulation came into force as regards

Wales on 6 March 2020.

67. COVID-19 is a human infectious and contagious disease an outbreak of which the

Secretary of State and/or Parliament has stipulated must be notified to the proper

officer of the relevant local authority or the Health Protection Agency pursuant to the

Health Protection (Notification) Regulations 2010. In the context of the said Regulations

and UK legislation concerning notifiable disease, a reasonable person would have

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understood that, for the purposes of the notifiable disease provision in MSA1, reference

to the competent local authority encompassed relevant authorities, including central

government and/or parliament, competent to exercise and exercising authority in and

over the area occupied by the relevant local government body. On that basis, it is

admitted that COVID-19 is a notifiable disease within limb (b) of the definition set out

in paragraph 65 above. Otherwise, it is denied.

68. As to the requirement in MSA1 Clause 6 of any notifiable disease within a radius of

twenty five miles of the premises:

68.1 In every case, the area within 25 miles of the premises is to be identified by

drawing a circle with a radius of 25 miles measured in a straight line, having the

premises at the centre of the circle (the “Relevant Area”).

68.2 If the Insured proves the presence of at least one case of COVID-19 within the

Relevant Area (as to the proof of which, see section F above), the requirement is

met but, for coverage, the Insured must continue to prove that the interruption

of or interference with the business was in consequence of and/or “following”

the one case (or more) relied upon as satisfying the notifiable disease

requirement.

68.3 The causal requirement necessary to be satisfied by the Insured is that of

proximate causation, alternatively that there should be a looser but nevertheless

significant causal connection between the case(s) of disease specifically within the

Relevant Area and the interruption or interference. The Insured must prove that

the case or cases of disease within the Relevant Area specifically caused the

interruption of or interference with the business for which a claim to an indemnity

is made. A general countrywide threat or risk of injury, or even the existence

generally of a notifiable disease, attracting countrywide central government

action with no reference to or reliance upon a specific case or cases of notifiable

disease within the Relevant Area is not covered.

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68.4 If the Insured does not prove the presence of at least one case of COVID-19 within

the Relevant Area, the requirement is not met.

69. The Insured has no claim for any interruption of or interference with the business

incurred prior to (i) 6.16pm on 5 March 2020 (in England), alternatively 6 March 2020

(in Wales), when COVID-19 became a notifiable disease; and/or (ii) the date when the

Insured proves that there was first at least one confirmed case of COVID-19 within the

Relevant Area.

70. As regards any interruption of or interference with the business incurred after that

date:

70.1 The Fifth Defendant’s case on causation is set out at section N. below.

70.2 Further or alternatively, and specifically with regard to MSA1 Clause 6, the Insured

has no claim insofar as the interruption of or interference with the business:

(a) Was caused by action taken by the Insured itself or the public, where such

action was (i) taken in ignorance of and/or not as a result of any confirmed

cases of COVID-19 within the Relevant Area and/or (ii) not taken pursuant

to government guidance or requirement attributable specifically to at least

one confirmed case of COVID-19 within the Relevant Area.

(b) Was caused by action taken by the Insured or the public pursuant to

government guidance or requirement, where such government guidance or

requirement pre-dated the first confirmed case of COVID-19 in the Relevant

Area.

(c) Was not caused by at least one confirmed case of COVID-19 in the Relevant

Area.


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71.1 Schedule 5 to the Particulars of Claim is denied as it applies to MSA1.


to MSA1 and all paragraphs of the Particulars of Claim to which the foregoing

paragraphs refer or on which they rely are denied.


declarations claimed with reference to MSA1.


73. The MS Amlin Type 2 wording (“MSA2”) is found in policies insuring a range of

businesses

73.1 some of which were not required to close pursuant to government legislation or

regulations; and

73.2 some of which were required to close pursuant to government legislation or

regulations – in some cases pursuant to the 21 March Regulations and in other

cases pursuant to the 26 March Regulations.

MSA2 Additional Cover clause 8 – Prevention of access – non damage

74. Section A sub-section 2 – Business Interruption, Additional Cover clause 8 – Prevention

of access – non damage (“MSA2 Clause 8”) insured against financial losses and other

items specified in the policy schedule [1] resulting solely and directly from [2]

interruption to the business caused by [3] an incident within a one mile radius of the

insured’s premises [4] which results in a denial of or hindrance in access to the premises

during the period of insurance, [5] imposed by any civil or statutory authority or by

order of the government or any public authority, [6] for more than 24 hours.

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75.1 The insured peril was interruption to the business caused by an incident within

the specified radius of the premises having the specified effect for the specified

period.

75.2 The only loss recoverable is that which is caused solely and directly, that is

proximately and only, by the insured peril as defined above.

75.3 Interruption to the business requires a complete cessation of the business

conducted at the premises. It is distinct from mere interference with the business

conducted at the premises.

75.4 The complete cessation of the insured business must itself have been caused by

an incident, meaning a distinct and specific happening,

(a) which must be proved to have taken place within a radius of one mile from

the premises, and

(b) which must have resulted in a government / public authority order, or civil

/ statutory authority imposition (as the case may be) having the effect of

denying or hindering physical access to the premises.

75.5 An incident is not a mere state of affairs and it is not something which forms part

of the generality of a situation to which the government might respond: the

distinct and specific happening must specifically cause the qualifying authority to

deny or hinder physical access to the premises.

75.6 Access to the premises is to be distinguished from use of the premises. Denial of

or hindrance in access to the premises will only occur where physical access is

impossible or inhibited, but not where the mere use of the premises is legally

restricted or proscribed.

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75.7 Even if that is wrong, the necessity for any denial of or hindrance in access to be

imposed by civil or statutory authority or by order of the government or any public

authority means that nothing short of legislation or legally enforceable

requirement could suffice.

76. None of the government’s legislation (nor, if relevant, guidance, advice, exhortation,

encouragement and/or instructions) had the effect of denying or hindering physical

access.

77. If (contrary to paragraphs 75.6 and 76 above) the application of the 21 March and/or

26 March Regulations was capable of denying or hindering access to the insured

premises (where the effect, if any, of such Regulations depends on the nature of the

insured’s business conducted from the insured premises), neither the impositions in the

said Regulations nor such denial of or hindrance in access were the result of an incident

within a one mile radius of the premises.

78. Neither the pandemic nor the presence of a person having COVID-19 within one mile of

the premises constitutes an incident.

79. In any event, the clause requires that there must be loss resulting solely and directly

from an interruption to the business caused by an incident within a one-mile radius of

the premises. This requires (i) a complete cessation of the business, which is (ii)

proximately caused by (iii) an incident within a one-mile radius of the insured premises.

The FCA has not alleged the occurrence of any incident (let alone within a one mile

radius) having any such effect on any insured business.

MSA2 Additional Cover clause 6 – Notifiable Disease

80. Section A sub-section 2 – Business Interruption, Additional Cover clause 6 – Notifiable

disease etc. (“MSA2 Clause 6”) insured against Consequential loss (as defined) as a

result of interruption of or interference with the business following (amongst other

things), by (a)(iii), any notifiable disease (as defined) within a radius of twenty five miles

of the premises.

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81. Consequential loss was defined as

“Loss resulting from interruption of or interference with the business carried on by you

at the premises following damage to property used by you at the premises for the

purpose of the business.”










85. The MS Amlin Type 3 wording (“MSA3”) is found only in policies insuring businesses

operating as forges (i.e. smithies), being business of a type which was never required to

close pursuant to any government legislation or regulations. Footnote 11 on page 31

of the Particulars of Claim is admitted by the Fifth Defendant in relation to the MSA3

wording. Within the categorisations adopted by the FCA, the MSA3 wording was only

found in policies insuring businesses within category 5.

MSA3 Additional Cover clause 1 – Prevention of access

86. Section 2 – Business Interruption, Additional Cover clause 1 – Prevention of access

(“MSA3 Clause 1”) insured against loss resulting from interruption or interference with

the business because of action by a competent public authority following threat of or

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risk of injury in the vicinity of the premises which will prevent or hinder use of the

premises or access to them.

87. Although MSA3 Clause 1 did not use the capitalised term “Injury”, the word injury in

MSA3 Clause 1 was intended to carry the meaning given to the defined term on page

12 of the policy wording, namely “Bodily injury, death, disease, illness or shock.” COVID-

19 therefore fell within the meaning of the word “injury” in MSA3 Clause 1.


88.1 The insured peril was [1] interruption or interference with the business at the

premises [2] because of action by a competent public authority [3] following

threat or risk of injury in the vicinity of the premises [4] which will prevent or

hinder use of the premises or access to them.

88.2 The threat or risk of injury must be a specific threat or risk of injury referable

specifically to the vicinity of the premises, and proximately causing or giving rise

to specific action by a competent public authority having the effect of preventing

or hindering the use of the premises or access to them.

88.3 A general countrywide threat or risk of injury attracting indiscriminate central

government action which has no specific reference to the vicinity or to anything

specifically happening in the vicinity is not covered.

88.4 Neither access to nor use of the premises is prevented unless it is rendered

physically (in the case of access and use) or legally (in the case of use) impossible.

88.5 Use of and/or access to the premises is hindered where it is made more difficult

or is inhibited, and whether the difficulty or inhibition applies to the Insured

and/or to its employees and/or to its customers.

89. There was no threat or risk of injury anywhere in the UK prior to 12 March 2020. After

12 March 2020, it is a question of fact to be determined in each case having regard to

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the location of the insured premises whether and, if so, when there was first a specific

threat or risk of injury specific to the vicinity of such premises.

90. It is noted (with reference to paragraph 46) that the FCA does not allege any prevention

or hindrance of access or use at any time prior to 16 March 2020.

91. “Following” means proximately caused by, alternatively having a significant causal

connection with. In the premises:

91.1 Any action pre-dating the existence of a threat or risk of injury in the vicinity of

any insured’s premises was not “following” such threat or risk of injury.

91.2 In relation to any action post-dating the existence of a threat or risk of injury in

the vicinity of any insured’s premises, it is question of fact (on which the Insured

bears the burden of proof) whether such action (even if it had the required effect)

was caused by such threat or risk of injury.

92. While each of Her Majesty’s Government and Parliament is a competent public

authority within the meaning of MSA3 Clause 1, they neither (i) took action following

any specific threat or risk of injury in the vicinity of any relevant premises nor (ii) took

action which had the effect of preventing or hindering the use of the premises or access

to them by any Insured operating a business of the type covered under MSA3.

93. Further or alternatively, the determination of the question whether or not there has

been any loss resulting from interruption of or interference with the business of any

insured forge because of any qualifying action of any competent public authority is one

of fact. To the best of the Fifth Defendant’s knowledge and belief, it has received no

claims under any of its Forge policies.

94. The Fifth Defendant’s case as to causation of loss (or the lack thereof) is set out in

section N below.


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95.2 It is further specifically denied that the appropriate declarations could ever be in

the terms set out in Schedule 5 with reference to MSAmlin3, where the terms of

those declarations repeat those sought in relation to MSAmlin2.






N. Causation

97. The Third and Fifth Defendants are only liable for loss proximately caused by the insured

peril under the relevant Policy. They are not liable for any loss which is not proximately

caused by the insured peril. The insured peril in each case is defined and established by

the policy wording entered into when the contract of insurance was made. The

following paragraphs are without prejudice to all the foregoing and proceed on the

assumption of an established insured peril.

98. Loss cannot have been (proximately) caused by an insured peril if such loss was not

factually caused by it. Under all relevant Policies, the “but for” test is a necessary but

not sufficient condition to establish causation.

99. The “but for” language in the applicable trends clauses restates these ordinary

principles of causation which apply even in the absence of such clauses.

100. Without prejudice to the burden of proof, which rests on the FCA (and the Insured in

every case) to prove that the losses claimed were caused by the insured peril, including

that such losses would not have occurred “but for” the insured peril:

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100.1 Covid-19 nationally and internationally was a proximate cause of all losses

suffered. If it was the sole proximate cause, there is no cover for any Insured

under any of the relevant policies because Covid-19 per se is not an insured peril.

100.2 The response to Covid-19 of individuals (whether consumers, employees,

business owners or members of society) and businesses, including (i) the adverse

impact of such response on economic activity and public confidence and/or (ii)

the circumstances or decisions of businesses on which a given Insured is

dependent for the conduct of the insured business, is likely to have been a

proximate cause of at least a material proportion of the losses suffered by many,

possibly most, Insureds in most situations, regardless of any relevant government

action of any kind. If and insofar as such individual (and non-governmental)

response was either the sole proximate cause or a concurrent interdependent

proximate cause with Covid-19 itself, there is no cover for any Insured under any

of the relevant policies because individual response to Covid-19 which would have

occurred regardless of any relevant government action is not an insured peril.

100.3 With specific reference to MSA1 Clause 6 and MSA2 Clause 6, illness sustained by

any person from Covid-19 after 5 March 2020 within a 25 mile radius of the

insured premises was a factual cause and, if so, a proximate cause only to the

extent of the business interruption loss (if any) which would not have occurred

but for such illness sustained.

100.4 With specific reference to the remainder of the relevant coverage clauses,

government action / order of the defined type (as precisely defined in relation to

each relevant wording below) was a factual cause and, if so, a proximate cause

only to the extent of the business interruption loss (if any) which would not have

occurred but for such defined government action / order.

100.5 Under MSA2 Clause 8, the policy only responds to loss which the Insured can

prove was solely and directly caused by the insured peril.

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101. The issue of what, if any, business interruption loss was factually and proximately

caused by an insured peril can only be determined on the facts of each individual case,

having regard to all the facts considered in the context of, and with reference to, the

relevant policy wording.

102. Paragraph 53.1 is denied. None of the relevant Policies underwritten by the Third and

Fifth Defendants insures against the peril identified in paragraph 53.1. The insured

perils in the policies of the Third and Fifth Defendants are narrowly circumscribed and

cover localised events.

103. Paragraph 53.2 is denied. The correct approach in law is to identify and isolate the loss

(if any) proximately caused by the insured peril.

104. As to paragraph 54.1, if the Insured would have suffered the same (or some) loss but

for the local disease, emergency or public authority action (and whether by reason of

the disease, emergency or public authority action being broader than local or for some

other reason), the loss which the Insured would in any event have suffered has not been

caused by the insured peril in the policy and/or is not recoverable under the policy.

Save as aforesaid and as set out above in relation to the sample wordings, paragraph

54.1 is denied.

105. Paragraph 54.2 is denied. It begs the issue as to the meaning and effect of the Wordings

as written.

106. Paragraph 54.3 is denied. The cover created by the language in each case is to be

identified by construing and applying the whole of the language in its full context.

107. Paragraph 55 is denied. It amounts to no more than the assertion that it would be

absurd to restrict the Insured’s recovery to loss proximately caused by the insured peril.

The Third and the Fifth Defendants plead further as to the correct counterfactuals to be

applied on a proper construction of the relevant Policies below.

108. Paragraph 56 is denied.

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108.1 Whether, as a matter of the proper construction of the relevant Policy, the facts

and matters set out at paragraph 53.2(c) and (d) are to be treated separately and

distinctly for causation purposes depends on the identification of the insured peril

in each relevant coverage extension. The insured peril may require dividing lines

to be drawn, which would not otherwise need to be drawn.

108.2 In any event, there were as a matter of fact multiple national and local responses

to COVID-19 which were from different bodies and of different natures and legal

effects, and some of which resulted from the public response to COVID-19

irrespective of government or local authority, action or advice. It is specifically

denied that Her Majesty’s Government ever devised or implemented what can be

described as an indivisible and interlinked strategy and/or package of national

measures.

108.3 As to sub-paragraphs 56.1 to 56.8:

(a) It is admitted that the Prime Minister’s statement on 16 March 2020

addressed the facts and matters set out in sub-paragraph 56.1 (amongst

others).

(b) As to sub-paragraph 56.2, paragraphs 15.3 to 15.5 above are repeated.

(c) It is admitted that in his statements on 20 March 2020 and 23 March 2020,

the Prime Minister addressed the facts and matters set out in sub-

paragraphs 56.3 and 56.4 respectively (amongst others). For the avoidance

of doubt, the relevance of the fact that the Government addressed various

matters compendiously in its speeches or statements is denied.

(d) As to sub-paragraph 56.5, it is admitted that the 26 March Regulations

contained orders in relation to business closure and orders in relation to

restrictions on movement. Sub-paragraph 56.6 is admitted. It is irrelevant

that matters relating to business closure and restrictions on movement

were addressed in the same piece of legislation, to the extent they were.

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(e) As to sub-paragraph 56.7, save that no admissions are made as to the basis

on which any individual school decided to close, the facts and matters set

out in the second and third sentences are admitted. It is further admitted

that not all businesses were required to close. Save as aforesaid, the Third

and Fifth Defendants are unable to admit or deny.

(f) Save as aforesaid, sub-paragraphs 56.1 to 56.8 are denied.

109. Paragraph 57 is denied. By contrast with concurrent interdependent causes, concurrent

independent “causes” arise where there are two or more causes each of which is

sufficient on its own to bring about the loss in question. In these circumstances, the

Insured cannot establish that the insured peril is a factual cause of the loss as the loss

in question would have occurred in any event. Further or alternatively and specifically

with reference to MSA 2 Clause 8, where there is only cover for losses resulting solely

and directly from the insured peril, losses caused by concurrent causes of any kind are

outside the scope of the cover and therefore irrecoverable.

110. Paragraph 58 is denied. The principle of law being referred to only applies in cases of

concurrent interdependent causes, each of which is both a factual and proximate cause

of the loss, and not in cases of concurrent independent “causes”. Paragraph 109 above

is repeated. Specifically as to the last sentence, it would be contrary to the parties’

intentions and legal principle to read the causation language in the Wordings as

requiring the Insurers to indemnify for loss not proximately caused by the insured

peril(s).

111. As to paragraphs 59 and 60:

111.1 The relevant test so far as factual causation and the counter-factual is concerned

is the “but for” test. The question is: but for the insured peril, would the loss have

occurred? If and to the extent yes, no recovery. If and to the extent no, factual

causation is established but it still remains to be proved that the specific causal

requirements for recovery are satisfied.

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111.2 Without prejudice to the foregoing, the words and phrases “resulting from”,

“which results in”, “as a result of”, “caused by”, “due to”, “in consequence of”,

“because of” as used in the relevant Policies underwritten by the Third and Fifth

Defendants are capable of importing proximate causation but whether they do so

depends on the precise context in which they are used.

111.3 Paragraph 60 is denied. Paragraph 68.3 above is repeated. The causal connector

“following” still requires, at a minimum, the application and satisfaction of the

“but for” test.

111.4 Save as aforesaid, paragraphs 59 and 60 are denied.

112. In the paragraphs below, the Third and Fifth Defendants respectively plead separately

to each Wording relied upon by the FCA without prejudice to their case above in relation

to coverage and on the footing that the Insured can prove the relevant insured peril.

Save to the extent admitted or not admitted in the paragraphs below, and insofar as

they relate to the FCA’s case against the Third and/or Fifth Defendants, paragraphs 62

to 79 are denied. The Third and Fifth Defendants do not plead to those paragraphs

insofar as they do not relate to the FCA’s case against them.

MS Amlin Type 1 wording: MSA1 Clause 6


113.1 The Fifth Defendant agreed to indemnify against loss proximately caused by

interruption of or interference with the business following illness resulting from

notifiable disease sustained by any person within a twenty five mile radius of the

premises.

113.2 The Fifth Defendant did not agree to indemnify against loss which would have

been suffered by the Insured even if there had been no illness resulting from

notifiable disease sustained by any person within a twenty five mile radius of the

premises.

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114. The Insured’s loss was not proximately caused by the insured peril if and to the extent

that the Insured would have suffered the same loss but for illness resulting from

notifiable disease sustained by any person within the Relevant Area – that is, on a

counterfactual where no person sustained illness resulting from a notifiable disease

within the Relevant Area, but all other factors remain unchanged.

115. For the avoidance of doubt, and without prejudice to the burden of proof which is on

the Insured, as part of this counterfactual:

115.1 SARS-CoV-2 and/or Covid-19 continued to be present and to cause illness and/or

the risk of illness to people outside the Relevant Area; and/or

115.2 All advice and/or instructions and/or legislation of the Government (and other

authorities) in response to Covid-19 continued to take effect both inside and

outside the 25 mile radius, or, alternatively, outside the 25 mile radius; and/or

115.3 There would still have been adverse (economic) impact on businesses and other

organisations of SARS-CoV-2 and/or of Covid-19 (including as a result of their

effects on public and/or consumer behaviour, supply chain disruptions, reduction

in tourism and travel restrictions, spontaneous business decisions to close etc.):

(a) in the period prior to (or after the lifting of) any advice and/or instructions

and/or legislation of the Government (or other authorities) – as in fact has

occurred and is likely to occur in due course; and/or

(b) both within and outside the vicinity of the premises for as long as Covid-19

remained or remains in the UK (and/or globally) even if the Government (or

other authorities) had not issued or imposed any of the advice and/or

instructions and/or legislation which they did.

For the avoidance of doubt, the extent of the adverse economic impact on the

business of any particular Insured is not a matter for determination in these

proceedings.

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116. Further or alternatively, on a true construction of MSA1:

116.1 The basis of settlement provisions set out in Annex 1 (including the so-called

trends clause in the definition of “Standard Turnover”) apply to claims under

MSA1 Clause 6, with “damage” being read as “peril insured against”.

Consequently, claims made by Insureds are to be quantified by reference to the

basis of settlement provisions.

116.2 The trends clause (set out in the definition of “Standard turnover”) required, as a

matter of agreement between the parties, that: (i) a “but for” approach to

causation be adopted in the assessment of the Insured’s losses; and (ii)

consequently, that the Insured’s recoverable losses be assessed by reference to

the position the Insured would have been in but for the insured peril (or had the

insured peril not occurred).

116.3 There is nothing in the trends clause that requires the trend or variation or

special/other circumstance or otherwise to be something extraneous to the event

or state of affairs which gives rise to the insured peril; the only requirement is that

they be independent of the insured peril whether or not independent of the cause

of the insured peril.

116.4 The same counterfactual set out at paragraph 114 above is applicable when

adjusting the Insured’s losses pursuant to the trends clause.




interruption of or interference with the business at the premises following

defined action by the competent civil authority (viz. defined as action following a

danger in the vicinity of the premises) having a specified effect (viz. where access

will be prevented).

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been suffered by the Insured even if there had been no such defined action.

118. The Insured’s loss whether in whole or in part was not proximately caused by the

insured peril if and to the extent that the Insured would have suffered the same loss

but for the defined action – that is, on a counterfactual where the defined action by the

Government, whereby access to the premises was prevented, had not occurred, but all

other factors remain unchanged.


the Insured, as part of this counterfactual it is to be assumed that:

119.1 All other Government action (and action by any other relevant authorities)

continued to take effect; and/or

119.2 There continued to be a danger in the vicinity and/or outside the vicinity of the

insured premises from SARS-CoV-2 and/or Covid-19; and/or

119.3 SARS-CoV-2 and/or Covid-19 continued to be present (i) both within and outside

the vicinity; alternatively (ii) only outside the vicinity; and/or

119.4 The adverse (economic) impact on businesses and other organisations of SARS-

CoV-2 and/or of Covid-19 was as set out at paragraph 115.3 above.

120. Further or alternatively, paragraph 116 above as to the applicability and effect of the

basis of settlements provisions and the trends clause in MSA1 is repeated mutatis

mutandis, save that the counterfactual to be applied is as set out at paragraph 118

above.



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122. Further or alternatively,

122.1 In relation to ADA672-20190601 Retail (Instant Underwriting) and ADA626-

20190601 Leisure (Instant Underwriting) policies included in MSA2, paragraph

116 above is repeated mutatis mutandis.

122.2 As for the ADA627-20191024 Office and Surgery (Instant Underwriting) policy also

included in MSA2, the basis of settlement provisions set out in Annex 1 (including

the so-called trends clause in the “basis of settlement A – Loss of income” section)

apply to MSA2 Clause 6, with “damage” being read as “peril insured against”.

Consequently, claims made by Insureds are to be quantified by reference to the

basis of settlement provisions and paragraphs 116.2 to 116.4 above are repeated

mutatis mutandis.



123.1 The Fifth Defendant agreed to indemnify against loss solely and directly resulting

from interruption to the business caused by an incident within a one mile radius

of the premises which results in a denial or hindrance in access to the premises

imposed by order of the government.

123.2 The Fifth Defendant did not agree to indemnify in respect of any loss otherwise

proximately or concurrently caused.


insured peril if the Insured would have suffered the same loss but for such an incident

and/or such government order – that is, on a counterfactual where there had been no

incident within a one mile radius of the premises and/or no government order resulting

from any such incident, but all other factors remain unchanged.

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the one mile radius; alternatively (ii) only outside that area; and/or

125.2 All action by the Government (or any other relevant authorities), other than such

as amounted to orders denying or hindering access to the insured premises

resulting from the proved incident within a one mile radius of the premises,

continued to take effect both within and outside the one mile radius of the

premises; and/or



126. Further or alternatively, paragraph 122 above as to the applicability and effect of the

basis of settlements provisions and the trends clause in MSA2 are repeated mutatis

mutandis, save that the counterfactual to be applied is as set out at paragraph 124

above.




interruption of or interference with the business because of defined action by the

competent public authority (viz. defined as action following threat or risk of injury

in the vicinity of the premises) having a specified effect (viz. which will prevent or

hinder use of or access to the premises).



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but for the defined action – that is, on a counterfactual where the defined action by the

Government, whereby use of or access to the premises was prevented or hindered, had

not occurred, but all other factors remain unchanged.



129.1 All other Government action continued to take effect; and/or

129.2 There continued to be a threat or risk of injury in the vicinity and/or outside the

vicinity of the insured premises from SARS-CoV-2 and/or Covid-19; and/or


the vicinity; alternatively (ii) only outside the vicinity; and/or



130. Further or alternatively, the basis of settlement provisions set out in Annex 1 (including

the so-called trends clause in the bracketed provision) apply to claims under MSA3

Clause 1, with “damage” being read as “peril insured against”. Consequently, claims

made by Insureds are to be quantified by reference to the basis of settlement provisions

and paragraphs 116.2 to 116.4 above are repeated mutatis mutandis, save that the

counterfactual to be applied is as set out in paragraph 128 above.

Ecclesiastical Denial of Access Type 1.1 and 1.2 wording

131. EIO1.1 Clause 3 and EIO1.2 Clause 1 insured against loss (directly) resulting from

interruption of or interference with the Insured’s usual activities/business at the

premises [as a result of] [or in consequence of] access to or use of the premises being

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prevented or hindered by action of [G/g]overnment, [P/p]olice or [L/l]ocal [A/a]uthority

due to an emergency which could endanger human life.

132. On a true construction of EIO1.1 Clause 3 and EIO1.2 Clause 1:

132.1 The Third Defendant agreed to indemnify against loss proximately caused by

interruption of or interference with the insured’s usual activities/business at the

premises proximately caused by defined action of the government or other

identified authorities (viz. defined as action due to an emergency which could

endanger human life) having the specified effect (viz. preventing or hindering the

access to or use of the premises).

132.2 The Third Defendant did not agree to indemnify against loss which would have




but for the defined action – that is, on a counterfactual where the defined action,

whereby access to or use of the premises was prevented or hindered, had not occurred,

but all other factors remain unchanged.



134.1 All other Government action continued to take effect; and/or

134.2 There continued to be an emergency which could endanger human life from SARS-

CoV-2 and/or Covid-19; and/or

134.3 SARS-CoV-2 and/or Covid-19 continued to be present and to cause illness and the

risk of illness; and/or

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135. Further or alternatively, on a true construction of EIO 1.1 and EIO 1.2:

135.1 The basis of settlement provisions (including the so-called trends clauses) set out

in Annex 2 apply to claims under EIO 1.1 Clause 3 and EIO1.2 Clause 1, with

“damage” being read as “peril insured against”. Consequently, claims made by

insureds are to be quantified by reference to the basis of settlement provisions

and paragraphs 116.2 to 116.3 above are repeated mutatis mutandis.

135.2 The same counterfactual set out at paragraph 133 above is applicable when

adjusting the Insured’s losses pursuant to the applicable trends clauses.

O. Cover


136.1 Paragraphs 80.1 to 80.4 are denied so far as they concern the Third and Fifth

Defendants for the reasons set out herein above.

136.2 Paragraph 80.5 is noted and averred.

P. Declarations

137. Save that COVID-19 became notifiable on 6 March 2020 in Wales, the contents of

declaration 1) are admitted.

138. In the premises and save as expressly admitted or not admitted above, it is denied that

the declarations sought by the FCA against the Third and Fifth Defendants should be

granted.

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Conclusion

139. Save as expressly admitted or not admitted in this Defence and save that the last

sentence of paragraph 50 is noted and averred, each and every allegation in the

Particulars of Claim which is relied upon by the FCA as part of, or as relevant to, its case

against the Third and/or Fifth Defendants is denied as if the same were each set out and

separately denied.

140. In the premises, it is denied that the FCA is entitled to declarations in the terms sought

against the Third and Fifth Defendants.

7 King’s Bench Walk Temple London EC4Y 7DS

Gavin Kealey QC

Andrew Wales QC

Sushma Ananda

Henry Moore

Statement of Truth

The Third Defendant believes that the facts stated in this Defence are true. I understand

that proceedings for contempt of court may be brought against anyone who makes, or

causes to be made, a false statement in a document verified by a statement of truth

without an honest belief in its truth. I am duly authorised by the Third Defendant to sign

this Defence. Signed ……………………………………………. Date ……23 June 2020

Name (Printed) …..… Mark Christopher John Hews

Senior Office or Position held ….…Chief Executive Officer

ECCLESIASTICAL INSURANCE OFFICE PLC

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Annex 1: basis of settlement provisions in Fifth Defendant’s wordings

Policy wording (lead wording asterisked)

Basis of settlement provision Relevant definitions

Type 1

*ADA628-20190601 Commercial Combined (Instant Underwriting)

Policy Section 6 (Business interruption – Optional), Insuring clause, basis of settlement provisions

(pp. 60-61)

General Definitions, including definition of “Damage” (p. 12)

Policy Section 6 (Business interruption – Optional), Additional definitions on pp. 58-59, including definition of “Standard turnover” (i.e. the trends clause)

Type 2

*ADA672-20190601 Retail (Instant Underwriting)

Policy Section A – Automatic cover, Sub-section 2 – Business interruption, What is covered, basis of settlement provisions

(pp. 44-45)


Policy Section A – Automatic cover, Sub-section 2 – Business interruption, Additional definitions on pp. 42-44, including definition of “Standard turnover” (i.e. the trends clause)

ADA626-20190601 Leisure (Instant Underwriting)

Policy Section A – Automatic cover, Sub-section 2 – Business interruption, What is covered, basis of settlement provisions

(pp. 44-45)


Policy Section A – Automatic cover, Sub-section 2 – Business interruption, Additional definitions on pp. 42-44, including definition of “Standard turnover” (i.e. the trends clause)

ADA627-20191024 Office and Surgery (Instant Underwriting)

Policy Section A – Automatic cover, Sub-section 2 – Business interruption, What is covered, basis of settlement provisions (including the trends clause)

(pp. 42-43)


Policy Section A – Automatic cover, Sub-section 2 – Business interruption, Additional definitions on pp. 40-41, including the words “We will adjust the figures as necessary to provide for trends or special circumstances affecting the business before or after the damage or which would have affected the business had the damage not occurred” (i.e. the trends clause)

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Type 3

*ADA555-20191101 Forge Commercial Combined (with Eastlake & Beachell)

Policy Section 2 – Business Interruption, Sub section A – Estimated gross profit, basis of payment provisions

(p. 48)

General Definitions, definition of “Damage” (p. 11)

Policy Section 2 – Business Interruption, Sub section A – Estimated gross profit, Additional definitions on pp. 46-47, including definitions of “Annual gross rentals”, “Annual gross turnover”, “Rate of gross profit”, “Standard gross rentals”, “Standard turnover” and the bracketed provision included alongside (i.e. the trends clause)

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Annex 2: basis of settlement and loss of income provisions in Third Defendant’s wordings

Policy wording (lead wording asterisked)

Basis of settlement or loss of income provision

Relevant definitions

Type 1.1

PD3258 (ME871) Heritage Business and Leisure

Policy Section 4 (Business interruption), Basis of Settlement Clause

(pp. 55-56)

Policy Section 4 (Business Interruption), Definitions on pp. 54-55, including definitions of “Adjusted” (i.e. the trends clause) and “Damage”

Education (ME794) Policy Section 4 (Business interruption), Basis of Settlement Clause

(pp. 51-52)

Policy Section 4 (Business Interruption), Definition on pp. 50-51, including definitions of “Adjusted” (i.e. the trends clause) and “Damage”

Education (ME868) Policy Section 4 (Business interruption), Basis of Settlement Clause

(pp. 53-54)


ME866 Charity and Community


(pp. 54-55)


ME867 Faith and Community


(pp. 54-55)


ME869 Care Policy Section 3 (Business interruption), Cover Clause, Amount Payable

(pp. 35-36)

Policy Section 3 (Business Interruption), Definitions on p. 34, including definitions of “Adjusted” (i.e. the trends clause) and “Damage”

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PD3259 (ME872) Heritage Arts and Culture


(pp. 55-56)


*ME857 Parish Plus Policy Section 3 (Loss of Income), Basis of Settlement Clause

(pp. 43-44)

Policy Section 3 (Loss of Income), Definitions on p. 42, including the definition of “Damage”

ME858 Parishguard Policy Section 2 (Loss of Income), Basis of Settlement Clause

(pp. 37-38)

Policy Section 2 (Loss of Income), Definitions on p. 36, including the definition of “Damage”

PD2513 Pound Gates Nursery


(pp. 42-43)


Type 1.2

*ME886 Nurseries Policy Section 3 (Business interruption), Cover Clause, Amount Payable

(pp. 40-41)

Policy Section 3 (Business Interruption), Definitions on p. 39, including definitions of “Annual Revenue” and “Standard Revenue” (which both contain the trends clauses) and “Damage”

MGM602 Marsh School and College

Business Interruption Policy Section, Cover Clause, Amount Payable

(p. 35-36)

Business Interruption Policy Section, Definitions on pp. 34-35 including definitions of “Adjusted” (i.e. the trends clause) and “Damage”

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